Innovation Process

Managing Failures


Noble Failure

Learning from a failure that occurred regardless all efforts to anticipate and avoid it

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Vadim Kotelnikov




"I’m sure luck helps every successful entrepreneur. But it doesn’t come without a lot of preparation and hard work… You've got to start with your gut, with something you are really passionate about, for a good reason. You won’t get there by sitting in a closet and thinking, ‘Boy I know the world must want this.’"

~ Charles Schwab




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Charles Schwab Guiding Principles

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Case Studies Differentiating between Noble Failure and Stupid Failure

Charles Schwab pioneered seamless stock trading on Internet in 1996 and grew from a small firm to the World's leader.

The Tree of Online Success

David Pottruck, a  legendary leader of Charles Schwab, says: "The idea that failure is okay is ridiculous. I am not going to go around the company and reward someone for failing. But here at Schwab we differentiate between noble failure and stupid failure."

The Jazz of Innovation: 11 Guiding Principles Download PowerPoint presentation, pdf e-book

Criteria for Defining Noble Failure

Charles Schwab has a set of criteria for defining noble failure.

Noble failure occurs when:

  • you have a good plan and know what you're doing, you've thought everything through carefully, and have implemented with sufficient management discipline, that if you look back in review, you'd conclude it was thoughtfully done

  • you have a reasonable contingency plan to deal with any initial failure and the contingency plan must have been implemented

  • you need to debrief yourself and ask what you can learn from the experience that will lead your company to be smarter next time.

Learning SWOT Questions

Charles Schwab journals their failures and lessons they've learned. They maintain also a display of failed innovations and created a videotape for employee orientation. When celebration of noble failure becomes institutionalized, people within the organization are more willing to treat failures as a stepping stone to success, reassess earlier decisions and take corrective measures or even turn failures to opportunities.

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